ENTITY: TC ENERGY CORPORATION

ENTITY: TC ENERGY

Pipeline Infrastructure and the AI Data Center Power Demand Inflection

MACRO INTELLIGENCE MEMO

FROM: The 2030 Report DATE: June 2030 RE: TC Energy - Strategic Repositioning as Critical Infrastructure Provider for AI Buildout and Long-Term Growth Inflection CLASSIFICATION: Energy Infrastructure & Corporate Strategy Analysis

SUMMARY: THE BEAR CASE vs. THE BULL CASE

THE BEAR CASE (Cautious Infrastructure Transition, 2025-2030): TC Energy pursued gradual capacity expansion and selective AI data center positioning. By June 2030: - EBITDA: CAD 11.2B - Dividend: $1.35/share - Net income: CAD 2.8B - Stock price: CAD 54 - Market cap: CAD 93B - Capex deployment: CAD 8-10B through 2033 (traditional pace)

THE BULL CASE (Aggressive AI-Infrastructure Positioning, 2025-2030): In 2024-2025, TC Energy's leadership authorized: - $200M AI infrastructure management investment (smart grid control, predictive capacity optimization) - Aggressive accelerated capex ($12-14B through 2032, faster completion) - Direct partnerships with cloud providers (long-term contracted power agreements) - Hydrogen pipeline and storage infrastructure development (positioning for energy transition)

By June 2030 (AI-Infrastructure Leader Scenario): - EBITDA: CAD 12.5B (+11.6% vs. bear case) - Dividend: $1.52/share (+12.6% vs. bear case) - Net income: CAD 3.2B (+14.3% vs. bear case) - Stock price: CAD 68 (+25.9% vs. bear case) - Market cap: CAD 117B - Capex acceleration: 18-month ahead of schedule on data center power contracts - Competitive advantage: First-mover position in AI infrastructure power supply

Key Divergence: Bear case = traditional energy; Bull case = critical infrastructure for AI.

EXECUTIVE SUMMARY

TC Energy's transformation from 2025-2030 represents a paradigm reversal for an energy company once perceived as operating in a declining industry. In 2019-2024, TC Energy faced investor skepticism: Keystone XL cancellation, energy transition narratives, and concerns about stranded assets. The company's strategic posture was one of capital discipline and dividend sustainability in a mature, low-growth industry.

By late 2028, a realization emerged that inverted this narrative: AI data center buildout required enormous quantities of dispatchable power (24/7/365 availability), and natural gas was the only scalable solution in the 2030-2035 timeframe. Nuclear faced regulatory/build-time constraints. Renewables were intermittent. This created a structural opportunity for natural gas pipeline infrastructure, which had become a critical asset for the AI-powered economy.

TC Energy pivoted strategically to position itself as a "critical infrastructure provider for AI buildout" rather than a traditional energy company. The company committed to CAD 8-10 billion in capacity expansion through 2033, repositioned sales toward cloud infrastructure companies, and initiated ancillary businesses (hydrogen, battery storage, carbon capture). Result: EBITDA growth expectations increased from 3-5% (historical) to 8-12% annually; dividend growth expectations from 2-3% to 5-6% annually. This memo examines the strategic inflection, organizational response, financial implications, and risk management framework through June 2030.

THE REALIZATION

In late 2028, I had a conversation with a data center power engineer at a major cloud provider. He said something I've thought about nearly every day since:

"The problem isn't generating renewable power. The problem is that power is variable, and we need power to be constant and on-demand. That's what your pipelines solve."

He was describing TC Energy's natural gas infrastructure, but he wasn't talking about energy in the traditional sense. He was talking about strategic infrastructure for the AI-powered economy.

This insight started a deeper investigation into data center power economics. What I found was remarkable:

1. Data center buildout is accelerating exponentially. Microsoft, Google, Amazon, Meta, and dozens of smaller AI infrastructure companies are spending $50-80 billion annually on data center capex. This is forecast to grow to $100+ billion annually by 2032.

2. This buildout requires power. An enterprise-scale AI data center needs 500+ MW of continuous power. A large campus of data centers needs multiple gigawatts. In California alone, new data center power demand is projected to be 20+ GW by 2035.

3. This power must be dispatchable. Solar and wind are growing, but they're intermittent. You can't run an AI training job that's worth $100 million on intermittent power. You need power you can count on 24/7/365.

4. Natural gas is the only solution at scale today. Nuclear has longer build times and regulatory uncertainty. Hydroelectric is geographically limited. Coal is being phased out. That leaves natural gas as the only dispatchable power source that can be deployed at scale in the next 3-5 years.

5. Our pipelines are the constraint. To build data center power generation in specific geographic regions, you need to deliver natural gas to those regions. Our NGTL system, Columbia Gas, Mexico pipelines—these are the constraint on the growth of this entire ecosystem.

The implication was staggering: TC Energy, the company everyone thought was declining, actually controlled critical infrastructure for the most important economic trend of the decade.

THE STRATEGIC PIVOT

Based on this realization, the company has made a fundamental strategic pivot. We're repositioning from a traditional energy company to a critical infrastructure provider for AI-powered digital economy.

This isn't about abandoning our energy business. It's about reframing what our business actually does and where value creation lies.

What This Means Operationally

1. Pipeline Capacity Expansion

We're investing in capacity expansion on the NGTL system, Columbia Gas, and Mexico pipelines. Rather than assuming flat-to-declining throughput, we're planning for 15-25% throughput growth through 2035.

This requires capex. We're allocating CAD 8-10 billion over the next three years for expansion projects. This is aggressive, but the returns justify it.

Why? Because the marginal cost of expanding existing pipeline capacity is 3-5x lower than building new pipelines from scratch. If we can expand NGTL capacity by 20% with CAD 2 billion in capex, that's an enormous return on investment.

2. Pricing Strategy Shift

Historically, TC Energy has priced pipelines based on a cost-of-service model. Shippers paid what it cost us to operate the pipeline plus a regulated return.

Moving forward, we're transitioning to market-based pricing. Because our pipelines are increasingly in a supply-constrained market (high demand for capacity from data center power generation), we can charge market rates rather than cost-based rates.

This is already happening. Utilization on the NGTL is near capacity, and we're seeing shippers willing to pay premium prices for shipping rights. This is a fundamental margin expansion opportunity.

3. Power & Storage Investments

We're investing in new business lines that complement our core pipeline business:

• Hydrogen infrastructure: As hydrogen becomes a fuel source, the ability to transport hydrogen will be valuable. We're developing hydrogen pipelines and storage.
• Battery storage: Data centers need backup power. We're investing in utility-scale battery storage adjacent to our pipeline infrastructure.
• Carbon capture: If natural gas plants serving data centers are going to be part of the long-term power mix, carbon capture becomes important. We're investing in CCUS (carbon capture, utilization, and storage) infrastructure.

These aren't distractions from the core business. They're expansion of the core business into adjacent infrastructure layers that serve the same AI data center customer base.

4. Geographic Expansion

Our Mexico pipelines are positioned to serve data center power generation in Mexico, which is emerging as a hub for AI infrastructure investment (lower cost of labor, proximity to U.S. market, stable power regulation).

We're also evaluating pipeline investments in other regions with strategic importance for AI infrastructure: the Midwest U.S. (where there's significant data center buildout), and potentially Europe and Asia-Pacific in the medium term.

THE ORGANIZATIONAL SHIFT

This strategic pivot requires organizational change.

1. New Leadership

I'm bringing on a new Chief Technology Officer (joining from a cloud infrastructure company) to ensure we understand data center power requirements and can serve this customer base effectively.

I'm also promoting the VP of Commercial from our traditional energy business into the newly created role of Chief Commercial Officer for AI Infrastructure. Her remit will be to own all customer relationships with data center operators and power generators.

2. Sales Approach

Historically, we've sold pipelines to energy companies. Now we're selling to cloud infrastructure companies (Microsoft, Google, Amazon), independent power producers, and utilities building data center power plants.

This requires a different sales approach: less about commodity pricing negotiations, more about long-term strategic partnerships where we're the infrastructure foundation for their data center expansion plans.

I'm restructuring our sales organization to have dedicated teams focused on each of these customer segments.

3. Financial Metrics

We're shifting from thinking about the company in "net debt / EBITDA" terms to thinking about it in "critical infrastructure value" terms.

This means: - Expecting EBITDA growth of 8-12% annually (vs. historical 3-5%) - Targeting dividend growth of 5-6% annually (vs. historical 2-3%) - Willing to take on more debt to fund capacity expansion (targeting net debt/EBITDA ratio of 4.2x, vs. current 4.4x) - Evaluating M&A opportunities to expand our geographic footprint and customer relationships

MANAGING THE TRANSITION

This pivot is not without risk, and I want to be direct about how we're managing those risks.

Risk #1: What if data center power demand doesn't accelerate as expected?

If the AI buildout slows or cloud providers reduce capex, natural gas demand could plateau. We'd be left with excess capacity on our pipelines.

Mitigation: We're maintaining relationships with traditional natural gas customers (utilities, manufacturers) to ensure baseload demand. We're not betting entirely on data center growth. We're adding on top of a stable base business.

Risk #2: What if nuclear or other dispatchable power sources scale faster than expected?

If SMRs become economical and deployable faster than expected, demand for gas-fired generation could decline. This would reduce natural gas demand.

Mitigation: We're investing in hydrogen and other energy carriers, so we're not dependent entirely on natural gas. We're also invested in carbon capture, which could position us well if natural gas plants become "zero-carbon" through CCUS.

Risk #3: What if we over-invest in capacity and utilization doesn't materialize?

This is the most concrete risk. If we build 20% more pipeline capacity and demand only grows 10%, we've over-invested and returns on that capex will be below our hurdle rates.

Mitigation: We're being disciplined about capacity expansion. We're only building capacity where we have forward commitments or high-confidence demand signals. We're also front-loading capex on existing pipeline expansion rather than building entirely new pipelines (lower capital intensity).

STAKEHOLDER COMMUNICATION

For investors: The narrative is simple. TC Energy is a critical infrastructure company serving a secular growth trend (AI data center buildout). Rather than declining cash flows, expect growing cash flows and dividend growth. The investment thesis has shifted from "income" to "income + growth."

For employees: We're in growth mode for the first time in a decade. Promotions and career advancement opportunities are opening up as we expand the organization. If you're interested in working on the frontier of infrastructure innovation, now is your chance. (We're also being honest that some roles in traditional energy business will be rationalized as we shift resources to AI infrastructure.)

For the government and regulators: We're positioned to support national economic competitiveness in the AI era. Natural gas pipelines are critical infrastructure for data center buildout, which drives competitiveness in cloud computing, which underpins all of AI. By enabling TC Energy to invest and expand, governments are enabling their own economic competitiveness.

For traditional energy customers: We remain committed to serving traditional natural gas customers. The growth in data center power doesn't mean we're abandoning the baseload business. Both are valuable, and we're pursuing both.

THE MULTI-YEAR PLAN

2030-2031: Establish New Positioning

• Complete capacity expansion projects on NGTL and Columbia Gas (CAD 3-4 billion capex)
• Establish dedicated sales teams for cloud infrastructure customers
• Begin power & storage investments
• Communicate new strategic positioning to investors (change analyst narrative)
• Target: EBITDA growth of 10%+, dividend growth of 5-6%

2032-2033: Scale the Model

• Expand capacity on Mexico pipelines (opportunity for significant growth)
• Acquire smaller pipeline operators to expand geographic footprint
• Launch hydrogen pipeline projects
• Evaluate strategic M&A in power generation and battery storage
• Target: EBITDA growth of 8-10%, dividend growth of 5-6%

2034-2035: Reposition the Company

• By 2035, AI data center power infrastructure should represent 50-60% of our business (vs. 25-30% today)
• The company should be valued as a "critical infrastructure" business, not an "energy" business
• Dividend yield should be 3.5-4% with 5-6% annual growth (vs. 4.8% yield, 2-3% growth today)
• Evaluate whether to remain independently or be part of a larger infrastructure holding company

THE FINANCIAL IMPLICATIONS: 2030-2035 FORECAST

Revenue and EBITDA Projection:

Capital Deployment: - 2030-2032: CAD 8-10B capacity expansion capex - 2032-2035: CAD 6-8B ongoing maintenance + growth capex - M&A opportunities: CAD 2-4B (acquisition of smaller pipeline operators) - Total capex/M&A: CAD 16-22B over 5 years

Return on Invested Capital: - Traditional pipeline expansion: 7-9% ROIC (acceptable in low-growth industries) - AI data center-focused expansion: 10-12% ROIC (reflects constrained capacity and premium pricing) - Hydrogen/power/storage: 12-15% ROIC (higher margins, emerging industries)

Shareholder Returns: - Dividend growth: 5-6% annually (doubling from historical 2-3%) - Stock appreciation: 4-6% annually (driven by earnings growth and ROIC expansion) - Total shareholder return target: 10-12% annually (vs. historical 6-8%)

COMPETITIVE POSITIONING AND MOAT DURABILITY

Why TC Energy has defensible competitive advantages:

1. Regulatory barriers: Pipeline infrastructure requires regulatory approval; new pipeline construction faces multi-year permitting. Existing pipelines have regulatory protection (cost-of-service recovery minimums).

2. Physical asset constraints: You can't duplicate a pipeline that runs from Alberta to Texas. Competing pipelines would require billions in capex and multi-year permitting—essentially impossible for a competitor.

3. Customer switching costs: Data center operators don't switch pipeline providers easily. Once integrated into TC Energy's pipeline system, switching costs are enormous (would require building new infrastructure).

4. Capacity constraints: Because pipeline capacity is constrained and demand is growing, TC Energy can command premium pricing. This creates a virtuous cycle (high prices enable investment, which attracts more customers).

Risks to competitive position:

• Hydrogen economy reduces natural gas demand (mitigation: we're investing in hydrogen infrastructure)
• Data center power demand falters (mitigation: maintaining baseload customers)
• New pipeline infrastructure breaks our monopoly (unlikely given regulatory/capital barriers)

CLOSING THOUGHT

I said at the start that we were managing decline. I was wrong. We were failing to see the structural change happening around us.

TC Energy has been handed an extraordinary opportunity: to be the critical infrastructure foundation for the most important economic transformation of our time. The company that everyone thought was declining is actually perfectly positioned for growth.

This requires us to be bold about our strategy, disciplined about execution, and honest with ourselves about both opportunities and risks.

I believe we can do it. I'm excited about the path ahead.

François

THE DIVERGENCE: BEAR vs. BULL COMPARISON (2025-2030)

Confidential — For Board and Executive Committee Only

REFERENCES & DATA SOURCES

1. Bloomberg (Q2 2030): "TC Energy Q2 2030 Earnings: Pipeline Operations AI"
2. McKinsey & Company (2030): "Smart Infrastructure and AI-Driven Operations"
3. Reuters (2029): "Energy Infrastructure and Pipeline Technology"
4. S&P Global (2030): "Energy Infrastructure Company Valuations"
5. Gartner (2029): "Industrial IoT and Remote Monitoring Systems"
6. Morgan Stanley Utilities & Energy Infrastructure (June 2030): "Midstream Asset Valuations"
7. Goldman Sachs (2030): "Infrastructure Sector and Technology Integration"
8. IEA (2030): "Energy Infrastructure and Digitalization"
9. World Economic Forum (2029): "Energy Infrastructure Transformation"
10. Deloitte (2030): "Energy Infrastructure Digital Strategy"